Proportionality: The Fairness of Inequality

There was a time when boys played games of marbles following strict playground rules: contestants had to stand a prescribed distance away from the little pyramid of marbles, and chuck only marbles of the prescribed size. Rules ruled. Piaget was intrigued by the explanations children gave for moral judgements, and the playground is the arena in which the concept of fairness is honed.

Piaget followed a model which is rare nowadays. He observed his own children in great detail as they grew up. His was the least representative sample in the history of psychology. Nonetheless he launched the study of the development of morality, and the conception of fairness.

The majority of experimental studies done in psychological laboratories seem to show that even young children prefer equal shares rather than unequal shares. This would suggest that people have an innate preference for socialism and the re-distribution of wealth.

In fact, this is true only if people are asked to distribute goods between people who are unknown to them, and who have not behaved in any particular way which would make them consider that some were more worthy and deserving than others.

The moment you show that one person has been more helpful than another, or has worked harder than another, then judges believe that, as a matter of fairness, the more energetic and helpful person should get a greater share.

That is fair, after all, because those who were hard-working and helpful have deserved it because of their efforts. So although there are many studies suggesting that people do not like inequality, it turns out that what they most dislike is unfairness.

Once it can be shown that a distribution is fairly based on effort then respondents will tolerate and indeed require that the distribution of wealth is proportionate to effort and not just based on the mere fact of existing. People prefer unequal societies for the reason that they in fact they do not mind inequality if it is based on rewards for effort.

Unusually for a scientific paper, it is a good read. What really matters in these experiments is context, and once context is provided then it is clear that people accept unequal societies so long as they are based on a fair allocation of rewards, proportional to contribution.

The authors say:

There is immense concern about economic inequality, both among the scholarly community and in the general public, and many insist that equality is an important social goal. However, when people are asked about the ideal distribution of wealth in their country, they actually prefer unequal societies. We suggest that these two phenomena can be reconciled by noticing that, despite appearances to the contrary, there is no evidence that people are bothered by economic inequality itself. Rather, they are bothered by something that is often confounded with inequality: economic unfairness. Drawing upon laboratory studies, cross-cultural research, and experiments with babies and young children, we argue that humans naturally favour fair distributions, not equal ones, and that when fairness and equality clash, people prefer fair inequality over unfair equality. Both psychological research and decisions by policymakers would benefit from more clearly distinguishing inequality from unfairness.

The authors review a long series of experiments which seem to show that children prefer absolute equality in the sharing of rewards. Inequality is certainly a focus of political concern. It attracts those who make bold complaints of the form “The top 1% of people own XX% of the wealth” where the implication is that the owned wealth should be 1% but for foul reasons is much higher than that. This statistic contains several errors, and tends to mislead.

By the way, it amuses me that people who strongly object to a person’s general level of ability being represented “by a single figure” have no qualms about wealth being represented “by a single figure” despite it being based on chattels, residential property (sometimes minus mortgages, sometimes not), stocks and shares, bank accounts, pension rights totals (say, at 20 times annual payments), and other quasi-monetary benefits. Such critics should relax: although wealth estimates have methodological shortcomings, an overall figure gives a reasonable estimate for comparative purposes (as do estimates of general intelligence).

The Gini coefficient (0 is equitable distribution, 100 is outrageous inequity) is well-known, and usually widely quoted without comment, since the manifest goodness of equality is assumed to be agreed by all. Laboratory studies seem to confirm that people have a deep preference for equality.

So, when people are asked to distribute resources among a small number of people in a lab study, they insist on an exactly equal distribution. But when people are asked to distribute resources among a large group of people in the actual world, they reject an equal distribution, and prefer a certain extent of inequality. How can the strong preference for equality found in public policy discussion and laboratory studies coincide with the preference for societal inequality found in political and behavioural economic research?

We argue here that these two sets of findings can be reconciled through a surprising empirical claim: when the data are examined closely, it turns out that there is no evidence that people are actually concerned with economic inequality at all. Rather, they are bothered by something that is often confounded with inequality: economic unfairness.

We suggest that the perception that there is a preference for equality arises through an undue focus on special circumstances, often studied in the laboratory, where inequality and unfairness coincide. In most situations, however, including those involving real-world distributions of wealth, people’s concerns about fairness lead them to favour unequal distributions.

Anyone looking for evidence that people have a natural aversion to inequality will find numerous laboratory studies that seemingly confirm their view. For example, studies have found “a universal desire for more equal pay”, “egalitarian motives in humans”, “egalitarianism in young children”, and that “equality trumps reciprocity”. A Google Scholar search for “inequality aversion” yields over 10,000 papers that bear on this topic.

Furthermore, people appear to view the equal distribution of resources as a moral good; they express anger toward those who benefit from unequal distributions.

Indeed, these data might underestimate people’s preferences for unequal distributions. One follow-up study contrasted Norton and Ariely’s question about the percentage of wealth that should correspond to each quintile of the American population with a question about what the average wealth should be in each quintile. The former question resulted in an ideal ratio of poorest to wealthiest of about 1/4, but for the latter question the ratio jumped to 1/50. When the connection between the two questions was explained to participants, a majority chose the higher inequality ratio as reflecting their actual beliefs for both measures.

At this stage it should be made clear that all the “equality in the lab” researchers have not been telling lies. They are aware that inequality and unfairness are being confounded, but that message has been downplayed in the telling. From a research strategy perspective, I think it shows how a particular approach (strangers in a lab) fails to produce results which map onto real world observations. When participants come together without any back history, the ideal of equality rules. When the fuller context is given a chance to be considered, then subjects in an experiment have no hesitation in rewarding those people who rise early to go to work over those who rise late to do nothing.

Children not only reward those who have done more work, but also those who have been kind and helpful.

It follows, then, that if one believes that (a) people in the real world exhibit variation in effort, ability, moral deservingness, and so on, and (b) a fair system takes these considerations into account, then a preference for fairness will dictate that one should prefer unequal outcomes in actual societies.

One proposal is that fairness intuitions are rooted in adaptations for differentially responding to the prosocial and antisocial actions of others. For cooperation and pro-sociality to evolve, there has to be some solution to the problem of free-riders, cheaters, and bad actors. The usual explanation for this is that we have evolved a propensity to make bad behaviour costly and good behaviour beneficial, through punishment and reward

Our own argument against a focus on inequality is a psychological one. In this paper we have outlined a wealth of empirical evidence suggesting that people don’t care about reducing inequality per se. Rather, people have an aversion toward unfairness, and under certain special circumstances this leads them to reject unequal distributions. In other conditions, including those involving real-world distributions of wealth, it leads them to favour unequal distributions. In the current economic environment in the United States and other wealthy nations, concerns about fairness happen to lead to a preference for reducing the current level of inequality. However, in various other societies across the world and across history (for example, when faced with the communist ideals of the former USSR), concerns about fairness lead to anger about too much equality.

I have quoted from this paper at some length, because it is unusually well-written, clearly describes its techniques and its arguments, follows a logical sequence, and deals with an important topic. My final conclusion is that it leads us to an important general conclusion: the repeated finding of an effect (in this case an apparent preference for equality) should not stop us from digging deeper to check whether the methods are really picking up the causes of decisions, and whether the general effect persists in real-world settings. It turns out that when distributing rewards to unknown people, equal shares is probably a good strategy; but when distributing rewards to people who have shown varying levels of contribution, unequal rewards are often fairer.

Should we have a coefficient to measure to what extent a society provides appropriate rewards for varying levels of social contribution (effort, ability, pro-social acts)? What to call it? The Reward coefficient? Are social mobility measures an acceptable substitute?

It’s almost as though egalitarianism is a primal, unthinking position mostly adopted by children who don’t know any better. The simplest and most knee-jerk definition of “fairness”, defined by feeling.

The moment you step back and examine the world, inequality starts to make more sense.

digriff

The majority
of experimental studies done in psychological laboratories seem to show
that even young children prefer equal shares rather than unequal shares.
This would suggest that people have an innate preference for socialism
and the re-distribution of wealth.

Hate to rain on anyone’s parade. But those studies are pure horse shite. Young children are TAUGHT that by their parents. If you let them somehow grow up feral you would find out that each wants the ENTIRE pie, and has no inclination to share. Anyone who has ever raised more than one child knows this.